Abercrombie, teen brands lose in second quarter; adios booty shorts?!

Abercrombie & Fitch reports dour second-quarter earnings. The company said it plans to cut more than $100 million in expenses.

Abercrombie & Fitch reports dour second-quarter earnings. The company said it plans to cut more than $100 million in expenses. (Lawrence K. Ho / Los Angeles Times)

Tiffany Hsu

Maybe it’s a backlash to booty shorts and over-sexed advertising. Or it’s resentment over the resistance to plus-size products. Possibly it’s due to the economy, which is still squeezing teens and their parents.

Whatever the reason, Abercrombie & Fitch seems to have had a cruel, cruel summer.

The controversial mall-based chain on Thursday announced dismal earnings for its second quarter, which ended Aug. 3. Net income tanked 30% to $11.4 million, or 14 cents a share, from $17.1 million, or 20 cents a share, a year earlier.

Revenue slid 1% to $945.7 million. Same-store sales, which strip out volatility by considering performance only at stores open at least a year, dipped 10%. The New Albany, Ohio, company expects the gauge to be down even more in the third quarter.

The measure fell 6% for the namesake Abercrombie & Fitch brand. For Hollister Co., it was down 13%.

The company said it plans to cut more than $100 million in expenses.

"The second quarter was more difficult than expected due to weaker traffic and continued softness in the female business, consistent with what others have reported,” Chief Executive Mike Jeffries said in a statement.

Ken Perkins, an analyst with Retail Metrics Inc., wrote that Abercrombie was a huge negative surprise.

But the company is not alone in its woes. The entire teen apparel market has suffered “carnage” in the second quarter, amid weak foot traffic in the key back-to-school season, Perkins wrote in a note to clients.

Aeropostale will report its earnings after the market close Thursday. On Wednesday, American Eagle Outfitters Inc. revealed second quarter earnings that Chief Executive Robert Hanson said left him “extremely disappointed.”

Revenue slid 1.7% to $727.3 million. Same-store sales were down 7%, after increasing 8% in the same quarter last year.

Hanson blamed “a highly promotional and competitive retail landscape and a decline in traffic, which have continued into the third quarter.”

“Teen retail is NOT for the faint of heart,” wrote RBC Capital Markets analyst Howard Tubin in a note to clients.

There’s some hope, however, he said. Teens haven’t started shopping for fall.

“We continue to believe as we move through August and into September, traffic will build as the weather cools and we get further into the season,” he wrote. “However, competition is intense, promotions are aggressive, and in our view, the assortments at [Abercrombie] don't offer significant newness or differentiation.”